LAUNCHWhereHas All theFundingGone?Competitionheats up formillion-dollarVC deals

A disturbing rumor has been snaking its
way through Silicon Valley and the start-up community: Venture capitalists aren’t
funding start-ups, specifically with
investments of more than $1 million,
as they have in the past. The rumor even
has a name: the Series A Crunch.

The rumor isn’t entirely true: VCshaven’t dramatically cut back on Series Ainvestments—the first big rounds of VCfunding. But lately, competition forSeries A deals has been increasinglyfierce. More and more entrepreneurs arediscovering that raising seed fundingdoesn’t guarantee there will be Series Amoney down the line. CB Insights, aresearch firm in New York City, projectsthat some 1,000 recently funded seedcompanies will be “orphaned”—orunable to raise follow-on financing.

2008 2009 2010 2011 2012

The Funding Gap
Since 2008, the gap between the
number of seed rounds and
Series A investments has widened.

Angel/SeedRounds 225 265 412 671 814

Series A Rounds

118 125 176

255 244

source: PItchbook.com

But that’s only a
small part of the problem. The larger factor is
that the number of
Series A investments
(typically more than
$1 million) hasn’t kept

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